Solomon Islands: Economic Recovery Support Program (subprogram 1)

Sovereign Project | 43186-012

Summary

The program will help realize the private sector's potential, and specifically the growth potential of the mining, agriculture, fishing, and tourism industries. Progress is being made toward reopening a large gold mine closed during past civil unrest, and there is a potential to develop large nickel deposits. The best prospects for creating jobs and generating

government revenue lie in large-scale palm oil developments, in fishing (there is already one large fish cannery), and in the smallholder tree crops of cocoa and copra. The supply of fruit and vegetables to the urban centers also offers good prospects, as does the fledgling tourism industry.

The ERSP is anchored in the Solomon Islands Medium Term Development Strategy 2008-2010, supporting sector plans, and the 2009 and 2010 budgets. The program design is aligned with a policy matrix prepared by the government to identify key fiscal measures and structural policy actions. A core economic working group was established by the

Latest Project Documents


Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Project Name Economic Recovery Support Program (subprogram 1)
Project Number 43186-012
Country Solomon Islands
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0197-SOL: Economic Recovery Support Program (subprogram 1)
Asian Development Fund US$ 5.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector

Education - Education sector development

Health - Health system development

Public sector management - Public expenditure and fiscal management - Reforms of state owned enterprises

Transport - Transport policies and institutional development - Water transport (non-urban)

Gender Equity and Mainstreaming
Description

The program will help realize the private sector's potential, and specifically the growth potential of the mining, agriculture, fishing, and tourism industries. Progress is being made toward reopening a large gold mine closed during past civil unrest, and there is a potential to develop large nickel deposits. The best prospects for creating jobs and generating

government revenue lie in large-scale palm oil developments, in fishing (there is already one large fish cannery), and in the smallholder tree crops of cocoa and copra. The supply of fruit and vegetables to the urban centers also offers good prospects, as does the fledgling tourism industry.

The ERSP is anchored in the Solomon Islands Medium Term Development Strategy 2008-2010, supporting sector plans, and the 2009 and 2010 budgets. The program design is aligned with a policy matrix prepared by the government to identify key fiscal measures and structural policy actions. A core economic working group was established by the

government, the Regional Assistance Mission to Solomon Islands and key development partners in March 2009. The group was central to the preparation of the government's policy matrix. Through the core economic working group, key development partners have committed to support implementation of the government's policy matrix.

The ESRP builds on the macroeconomic assessment prepared by the International Monetary Fund through its 2009 Article IV Consultation. The consultation concluded that new external assistance in the form of budget support can provide a cushion for undertaking more lasting fiscal adjustment and improving budget execution. The International

Monetary Fund estimated a budget financing gap for the medium term of $25 million per year (around 4% of gross domestic product).

The ERSP has four output areas: (i) improved fiscal management, (ii) productivity enhancing structural initiatives, (iii) support for the vulnerable, and (iv) communication and ownership of policy actions. Subprograms 1 and 2 support the same four output areas, and these will be progressed concurrently under each subprogram.

Project Rationale and Linkage to Country/Regional Strategy

The Solomon Islands economy has been among the most affected in the Pacific by the global economic crisis. Global events have brought forward a sharp economic slowdown that had been expected between 2009 and 2015 as natural forest resources approached exhaustion. Gross domestic product growth averaged 7.3% per annum in the 5 years to 2008.

Preliminary estimates are of little or no economic growth in 2009. Economic stagnation is looming in the absence of a concerted government response to the economic deterioration.

Without policy action and additional external financial assistance, the government faces the prospect of exhausting its cash reserves and accumulating large expenditure arrears. No fiscal space would be left for additional government-funded development spending and much needed improvements in public service delivery. Such developments would undermine prospects for diversifying away from dependence on logging and foreign aid and achieving higher, socially inclusive economic growth.

The government has requested support from development partners to achieve economic adjustment. Early, prudent action can help reduce the economic and fiscal imbalances aggravated by the global economic crisis. This can in turn help avoid the re-emergence of potentially destabilizing social tensions. The ERSP provides the contribution of the

Asian Development Bank (ADB) to a collaborative response by key development partners to the government's request.

Impact Achievement of a higher and more inclusive path of economic growth
Project Outcome
Description of Outcome

Initiation of economic recovery combined with protection of the vulnerable members of the community

and the fiscal position.

Progress Toward Outcome Following a contraction of 1% in 2009 due to the global financial crisis, the economy returned to positive growth of about 4% in 2010.
Implementation Progress
Description of Project Outputs

Productivity enhancing structural initiatives

Improved fiscal management

Support for the vulnerable

Communication and ownership of policy actions

Status of Implementation Progress (Outputs, Activities, and Issues)

The progress toward reform in 2010 has been good, particularly in the area of public finnancial management. A few reform measures where progress has been slower than anticipated could be addressed by the end of the year pending actions by the new Government.

The compliance status of the 24 triggers for the second phase of the program have been nearly all met. A mission to be fielded in March 2011 will further assess the progress.

Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect environmental impacts.
Involuntary Resettlement The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect impacts on involuntary resettlement.
Indigenous Peoples The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect impacts on indigenous people.
Stakeholder Communication, Participation, and Consultation
During Project Design Ministry of Finance and Treasury (MOFT) and members of the Core Economic Working Group (CEWG), established in March 2009, which is the government -led working group who coordinate and implement economic and financial reforms in Solomon Islands. CEWG comprises central government agencies, including MOFT, Central Bank of Solomon Islands, Office of Prime Minister, Ministry of Planning Devevelopment and Aid Coordination, and key development partners.
During Project Implementation Continue to consult the stakeholders consulted during the project design stage, but also expand the consultation to a wider stakeholders including the private sector and civil society organizations such as Solomon Islands Chamber of Commerce and Industry and Transparency Solomon Islands.
Responsible ADB Officer Kanokpan Lao-Araya
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Liaison and Coordination Office in Sydney, Australia
Executing Agencies
Ministry of FinanceG.P.O. Box 26
Honiara
Solomon Islands
Timetable
Concept Clearance 20 Feb 2009
Fact Finding 17 Aug 2009 to 25 Aug 2009
MRM 22 Sep 2009
Approval 16 Mar 2010
Last Review Mission -
Last PDS Update 09 Mar 2011

Grant 0197-SOL

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
16 Mar 2010 18 Mar 2010 31 Mar 2010 31 Aug 2010 - 11 Feb 2011
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 5.00 Cumulative Contract Awards
ADB 5.00 16 Mar 2010 5.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 16 Mar 2010 5.00 0.00 100%

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.